CLA-2 CO:R:C:V 555484 LS
Mr. Lothar A. Bauerle, President
Kern-Liebers USA Inc.
1510 Albon Road
P.O. Box 396
Holland, Ohio 43528-0396
RE: Applicability of partial duty exemption under subheading
9802.00.80, HTSUS, to spring assemblies
Dear Mr. Bauerle:
This is in response to your letters of August 23 and
September 11, 1989, requesting a ruling on the applicability
of subheading 9802.00.80, Harmonized Tariff Schedule of the
United States (HTSUS), to spring assemblies to be imported
from Mexico. Samples of the components and the spring
assemblies were submitted for examination.
FACTS:
The spring component of the spring assembly is
manufactured in the U.S. from strip steel of U.S. origin and
European Community (EC) origin. The manufacturing process
consists of cutting the steel into strips, coiling the
springs, and stress relieving the springs by heating them in
an oven. In a conversation with an attorney on my staff, you
stated that the process of manufacturing the springs is
described in more detail in Headquarters Ruling Letter (HRL)
083313, dated April 13, 1989, which ruled on the country of
origin of the same seat belt retractor springs for tariff
purposes. In that ruling we stated that the springs are
manufactured from coils of rolled steel by the following
three-step process: (1) the coil is split into strips; (2)
the strips are processed into springs by cutting them to
length and coiling; and (3) the spring coils are heated to 230
degrees centigrade for 30 minutes.
Under the facts of the instant case, the springs are
exported to Mexico where they are assembled by your
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Mexican affiliate using two alternative processes. One
process involves the assembly of the spring into a plastic
spring housing which is of U.S. origin. The spring is then
lubricated. The other process involves the assembly of the
spring into a temporary wire retainer. This retainer, which
is imported from West Germany, is a round piece of wire
enclosed by twisting the ends. The temporary retainer is used
to hold the wound-up spring until the spring is transferred
permanently into another retainer. You advised by telephone
that the spring assembly consisting of the spring and
temporary wire retainer is imported into the U.S. and then
shipped back to Mexico to your customers. These customers
then transfer the spring into a permanent type of retainer.
Both types of spring assemblies are for use in automotive seat
belt retractor systems.
ISSUE:
(1) Are the steel springs considered to be fabricated
components of U.S. origin for purposes of subheading
9802.00.80, HTSUS?
(2) Do the operations performed in Mexico constitute an
assembly process, thereby entitling the spring assemblies to
the partial duty exemption under subheading 9802.00.80, HTSUS?
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, provides a partial duty
exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form,
shape or otherwise, and (c) have not been advanced
in value or improved in condition abroad except by being
assembled and except by operations incidental to the
assembly process such as cleaning, lubricating and
painting.
All three requirements of subheading 9802.00.80, HTSUS, must
be satisfied before a component may receive a duty allowance.
An article entered under this subheading is subject to duty
upon the full value of the imported assembled article less the
cost or value of such U.S. components, upon compliance with
the documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
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We must first determine whether the steel springs which
are manufactured in the U.S. from U.S. and imported strip
steel are "fabricated components, the product of the United
States." Section 10.14(b), Customs Regulations (19 CFR
10.14(b)), provides in pertinent part:
Foreign-made articles or materials may become products
of the United States if they undergo a process of
manufacture in the United States which results in their
substantial transformation. Substantial transformation
occurs when, as a result of manufacturing processes, a new
and different article emerges, having a distinctive name,
character, or use, which is different from that originally
possessed by the article or material before being subject
to the manufacturing process.
In HRL 083313, we found that the processing of the same
seat belt retractor springs from steel coils resulted in a new
and different article which had a new name, character, and
use. The springs were used specifically in automotive seat
belt retractor assemblies, while the steel sheets in coil were
unfit for that use. Although HRL 083313 involved the
additional step of assembling the springs into plastic spring
housings, the finding of substantial transformation also
applied to the processing of the retractor springs before
their assembly into the housings.
Applying HRL 083313 to the facts of this case, we find
that the steel springs manufactured in the U.S. from U.S. and
imported strip steel are fabricated components which are
products of the U.S. because the imported steel undergoes a
substantial transformation in the U.S.
For purposes of subheading 9802.00.80, HTSUS, the term
"assembly" means the fitting or joining together of fabricated
solid components. C.J. Tower & Sons of Buffalo, Inc. v.
United States, 62 Cust. Ct. 643, C.D. 3840, 304 F. Supp. 1187
(1969). Force fitting is listed in section 10.16, Customs
Regulations (19 CFR 10.16), as one of the acceptable means of
assembly. The operation of force fitting the spring into the
plastic housing in Mexico is an acceptable assembly operation
which entitles both the spring and housing to a duty allowance
under subheading 9802.00.80, HTSUS.
Section 10.16(b), Customs Regulations (19 CFR 10.16(b)),
provides that an operation incidental to the assembly process,
whether performed before, during, or after assembly, does not
constitute further fabrication, and does not preclude the
application of the exemption provided under subheading
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9802.00.80, HTSUS. Application of lubricants is listed in 19
CFR 10.16(b) as an example of an operation incidental to the
assembly process. Therefore, the lubrication of the spring
when it is assembled into the plastic housing is an acceptable
incidental assembly operation.
The process of securely fitting the spring into the
temporary wire retainer in Mexico is similar to a force
fitting operation and, therefore, constitutes an acceptable
assembly operation. The fact that the wire retainer serves as
a temporary method of holding the spring in place until it is
placed in a permanent retainer or housing does not disqualify
the assembled article from the benefit of subheading
9802.00.80, HTSUS. In Mattel, Inc. v. United States, 67 CCPA
74, C.A.D. 1248, 624 F.2d 1076 (1980), rev'g, 82 Cust Ct. 234,
C.D. 4805, 475 F. Supp. 683 (1979), phonograph records
packaged in envelopes and stapled to talking toy phones had no
use independent of the toy phones and were not meant to be
permanently attached to them. The court held that the records
were entitled to a duty allowance under item 807.00, Tariff
Schedules of the United States (TSUS) (now subheading
9802.00.80, HTSUS) as U.S. components of articles assembled
abroad.
We find that the U.S. fabricated components consisting of
the steel springs and plastic housings are in a condition
ready for assembly without further fabrication, do not lose
their physical identities in the assembly operations, and are
not otherwise advanced in value or improved in condition
except by assembly operations and operations incidental
thereto. Therefore, the spring assemblies imported into the
U.S. are eligible for the partial duty exemption under
subheading 9802.00.80, HTSUS.
HOLDING:
The steel springs manufactured in the U.S. from U.S. and
EC steel are fabricated components which are products of the
U.S. because the EC steel undergoes a substantial
transformation in the U.S. for purposes of subheading
9802.00.80, HTSUS. The operations of assembling the springs
into the plastic spring housings and the temporary wire
retainers are considered proper assembly operations. The
lubrication of the springs is an operation incidental to the
assembly process. Therefore, the imported spring assemblies
may be entered under subheading 9802.00.80, HTSUS, with
allowances in duty for the cost or value of the springs and
the plastic spring housings, which are the U.S. components
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incorporated therein. No allowance may be made under
subheading 9802.00.80, HTSUS, for the cost or value of the
wire retainer of West German origin.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Assistant Area Director, NIS
845327